Youth Unemployment in South East Europe: Averting a Lost Generation

“We are part of a generation that has become the record holder for the highest youth unemployment rate in Bosnia and Herzegovina ever….what are the causes of this situation and do we have a chance for a normal life?”

Answering these questions, posed in the opening paragraph of the winning essay from a recent contest exploring youth unemployment in Bosnia, is fundamental for building a foundation for economic recovery - not just for Bosnia and Herzegovina, but for all six countries in the South East Europe (SEE) region.

According to the sixth South East Europe Regional Economic Report (SEE RER), launched in May 2014, growth in the region is expected to continue through 2014 and into 2015, following modest growth of 2.2% in 2013.

While events like the recent floods that inundated the region in mid-May will undoubtedly slow future growth – particularly in the hardest hit areas of Bosnia and Herzegovina and Serbia – key drivers such as exports to the European Union and foreign direct investment point toward a continuation of this limited recovery in the region.

Looking to build on this growth, policymakers and experts in the region are turning their attention toward a variety of factors that continue to hinder growth and prevent a more rapid recovery. Fundamental to this process is addressing high unemployment, particularly among the region’s youth, which continues to affect the growth potential of Albania, Bosnia and Herzegovina, Kosovo, the Former Yugoslav Republic of Macedonia, Montenegro, and Serbia - the six countries comprising the SEE region.

According to the latest SEE RER, countries in the region have struggled to transform growth into job creation, and some 50% of the working population is currently outside of the workforce. While people of every age and background are being affected by this situation, it is the young -- those between the ages of 18-25 -- who are being hit the hardest. While unemployment in the region as a whole hovered around 24% in 2013, unemployment among youth averaged aver 49% - with this figure escalating as high as 55.3% in Kosovo and 62.8% in Bosnia and Herzegovina.

“Youth unemployment remains a serious source of concern for the region. Beyond its impact on economic growth, you have the real potential of creating a ‘lost generation’ who may never fully recover from the long-term impacts of this ongoing situation,” says Gallina Andronova Vincelette, Lead Author of the SEE RER and Lead Economist at The World Bank Group.

Empirical research suggests that prolonged unemployment early in one’s career can permanently reduce future earnings, diminish job prospects, and delay the acquisition of valuable on-the-job skills, notes the latest SEE RER. Furthermore, as this generation also represents the first generation to be fully educated after the collapse of the communist regimes in the region, a failure to integrate the youth into the labor force means that countries could miss out on their most productive generation to date.      

These dim prospects are reshaping the policy landscape in the SEE6 countries and prompting governments in the region to work with the World Bank Group to begin exploring specific, differentiated policies that can better address youth unemployment. The preliminary analysis of these issues included in the latest SEE RER represents an initial assessment in this direction and lays the foundation for more work to follow.

This analysis shows that reducing youth unemployment will require the acceleration of economic growth that is based on improved skills, better education, and updated labor market policies, as well as shifting the focus of education systems toward science, technology, engineering.

The ongoing analysis of the root causes of youth unemployment being conducted by The World Bank Group and its regional partners will go a long way toward find solutions for a generation in danger of being lost.